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ACCOUNTING 9706/31
Paper 3 Multiple Choice October/November 2009
1 hour
Additional Materials: Multiple Choice Answer Sheet
Soft clean eraser
*0349969717*
There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.
Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
Any rough working should be done in this booklet.
Calculators may be used.
IB09 11_9706_31/RP
© UCLES 2009 [Turn over
2
Y wishes to retire.
Capital account balances are X $120 000, Y $130 000 and Z $150 000.
Goodwill is recorded in the books as $50 000 but the partners agree it is worth $90 000.
Year 1 Year 2
$ 000 $ 000
stock 160 220
debtors 85 63
bank 33 212
creditors 72 87
Operating profit before interest and depreciation was $240 000. Depreciation charges for the year
amounted to $42 000.
What was the net cash flow from operating activities in Year 2?
$ 000
ordinary share capital 600
share premium account 200
retained profit 100
900
10 % debenture stock 120
The company has decided to redeem all its debenture stock at a premium of 5 %.
Which is true?
The company decides to purchase 60 000 of its own shares for $400 000.
5 At the end of a financial year a company redeemed $50 000 of 8 % debentures at a premium of
4 %.
What was the total paid to debenture holders during that year?
6 X Ltd. buys business Y for $100 000. At the date of purchase the balance sheet of business Y
shows the following.
$ 000
fixed assets 30
current assets 90
current liabilities 65
capital account 55
7 A business with net tangible assets of $110 000 is purchased by a company for $150 000.
The company completes the transaction by a cash payment of $20 000 and an issue of its $0.50
ordinary shares, fully paid, at $1.30 each.
By how much will the balance on the company’s Ordinary Share Capital account increase?
8 When the business of X was purchased by Y plc, negative goodwill of $100 000 arose. The
following table shows an extract of X’s balance sheet at the purchase date.
$ 000
$ 000
goodwill 35
equipment, at cost, less depreciation 70
bank overdraft 17
loan repayable over 5 years 100
(current liability portion $20 000)
stocks for resale 95
trade creditors 54
6 month deposit account 125
A 1 only
B 1 and 2 only
C 1, 2 and 3 only
D 2, 3 and 4 only
11 A company has the following items in its accounts for the year ended 31 August 2009.
What is the correct accounting treatment for these items at 31 August 2009?
A 0 180 000
B 30 000 150 000
C 50 000 130 000
D 100 000 80 000
$ 000 $ 000
operating profit 78
interest paid 16
ordinary dividend paid 20 (36)
retained profit for the year 42
transfer to general reserve (15)
retained profit at beginning of year 30
retained profit at end of year 57
How will the debtors and creditors be shown in the published accounts?
debtors creditors
$ $
An appropriate level of dividend cover for the ordinary shares is 1.5 times.
A issuing debentures
B making a bonus issue of shares
C making a rights issue of shares
D taking out an unsecured long term loan
expenditure $
18 A company makes three products for which the following details are given.
The same labour is used by all three products and it costs $2.00 per hour.
In which priority should the product be made in order to achieve maximum profit from the
available labour?
first last
A X Y Z
B Y Z X
C Y X Z
D Z X Y
19 A company is evaluating its plans to close a unit within its business. If closed, the employees at
the unit would be redeployed elsewhere in the business. The costs associated with the closure
are as follows.
$ 000
A $2000 under-recovered
B $2000 over-recovered
C $6500 under-recovered
D $8000 under-recovered
21 At the beginning of a given period the value of work-in-progress was $11 000.
At the end of the period work-in-progress consisted of 700 units which were complete as to 80 %
of materials and 50 % labour.
What was the change in the value of the work-in-progress during the period?
decrease increase
$ $
A 1550 -
B - 1550
C 5225 -
D - 5225
22 What is the starting point in the preparation of a budget for a manufacturing organisation?
A a cash forecast
B amending last year’s budget to take account of the effects of inflation
C forecasting employee numbers
D identifying the key budget factor
23 Which statement is true about the operation of an effective budgetary control system?
A It will only use past data which means that it is not forward looking.
B It will help a company plan and control the use of its financial and other resources.
C It will help a company prepare its annual statutory accounts.
D It will stop managers cooperating with each other.
24 The master budget of a company is being prepared. The following information is available.
26 The prime cost for a business comprises direct materials and direct labour. At the end of a trading
period the following variances are calculated.
If the actual cost was $19 500, what is the standard prime cost?
27 The table shows information for production during the last three months.
budget actual
The budgeted overheads for a company for a three month period are $620 000.
budgeted actual
A $9 adverse
B $9 favourable
C $18 adverse
D $18 favourable
10% 6000
16% (3000)
A 10 % B 12 % C 14 % D 16 %
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